OAR 150-308-0270: Valuation of Contaminated Property

(1) Definitions: (a) “Contaminated site” means real property that, on the assessment date: (A) Is on the National Priority List of the Environmental Protection Agency; (B) Is included by the Department of Environmental Quality in an inventory of confirmed releases pursuant to ORS 465.225; (C) Is an illegal drug manufacturing site as defined in ORS 453.858; or (D) Is demonstrated as provided under Section (2) of this rule to have had a release of a hazardous substance as defined in ORS 465.200. (b) “Contaminated site” does not include any permitted release or permitted facility approved by the Department of Environmental Quality for storage or disposal of a hazardous substance. (c) “Cost to cure” means the discounted present value of the estimated after tax cost of the remaining remedial work specific to the subject property to remove, contain, or treat the hazardous substance. Cost to cure may include the cost of environmental audits, surety bonds, insurance, monitoring costs, and engineering and legal fees. The costs must be directly related to the clean up or containment of a hazardous substance. (2) Demonstrating Contamination of Site: A property is defined as a contaminated site under Section (1)(a)(D) above if it is shown that the property has had a release of a hazardous substance. This will be demonstrated through: (a) The submission of reliable, objective information such as engineering studies, environmental audits, laboratory reports or historical records; or (b) Evidence that the release has been reported to the Department of Environmental Quality. (3) Appraising Contaminated Sites: The real market value of a contaminated site shall be determined in accord with this rule. The appraiser shall consider the Sales Comparison Approach, the Cost Approach, and the Income Approach. For a particular contaminated site, it may be that all three approaches cannot be applied, however, each shall be investigated for its merit. In all cases, actual market data are the most reliable indicators. (a) The Sales Comparison Approach may be used to determine the real market value of a contaminated site by comparison with verified sales of similarly contaminated sites. If no sales exist of property similarly contaminated, a comparison may be made to sales of properties without contamination. Adjustment factors shall be developed to account for the influence of contamination based upon a cost to cure analysis. These factors shall be applied to the subject property. Adjustments shall be considered for the following: (A) Limitations upon the use of the contaminated site due to the nature and extent of the contamination or due to governmental restrictions related to contamination; (B) The increased cost to insure or finance the property; (C) The potential liability for the cost to cure; (D) Governmental limitations and restrictions placed upon the transferability of all or any portion of the contaminated sites; (E) Other market influences. (b) The Cost Approach may be used to determine the value of the contaminated site without the contamination. The cost to cure may be deducted as a measure of functional obsolescence. (c) The Income Approach should use market rental data. If market rental data are not available, the property’s actual income may be used. (A) The income stream may be adjusted to reflect the estimated annual cost of remedial work specific to the subject property to remove, contain, or treat the hazardous substance during those years the cost is incurred. The annual cost of remedial work may include the cost of environmental audits, surety bonds, insurance, monitoring cots, and engineering and legal fees. The costs must be directly related to the clean up or containment of a hazardous substance. (B) If the capitalization rate is derived from properties with similar contamination, no adjustment should be made to that rate. If the rate is developed from properties without contamination, or a built-up rate is used, consider adjustments for the increased present and contingent future risk of ownership, difficulties in future appreciation or depreciation, and the effect upon the ability to sell or transfer the property; that is, the liquidity of an investment in the property. (C) Alternately, an income approach projecting the income stream as if the subject property was not contaminated, may be used when the cost to cure is deducted from the resultant value indicator. (d) The market may respond to contamination in a variety of ways. In all cases, actual market sales and income data are the most reliable indicators.